At an activity level of 9,000 machine-hours in a month, Moffatt Corporation's total variable maintenance cost is $390,240 and its total fixed maintenance cost is $368,280.What would be the average fixed maintenance cost per unit at an activity level of 9,300 machine-hours in a month? Assume that this level of activity is within the relevant range.
A) $40.92
B) $84.28
C) $39.60
D) $54.93

Question

Quizplus · Accepted Answer

First, we need to find the total maintenance cost at 9,300 machine-hours:
Total Maintenance Cost = Total Fixed Maintenance Cost + Total Variable Maintenance Cost
Total Maintenance Cost = $368,280 + ($390,240/9,000 machine-hours x 9,300 machine-hours)
Total Maintenance Cost = $368,280 + $405,320
Total Maintenance Cost = $773,600

Next, we need to find the average fixed maintenance cost per unit:
Average Fixed Maintenance Cost per Unit = Total Fixed Maintenance Cost ÷ Activity Level
Average Fixed Maintenance Cost per Unit = $368,280 ÷ 9,300 machine-hours
Average Fixed Maintenance Cost per Unit = $39.60

Therefore, the best choice is C.

At an Activity Level of 9,000 Machine-Hours in a Month